00:01
So here we're talking about trade in bicycles.
00:03
So i'm immediately going to start by drawing a market, right, for bicycles.
00:09
So a market is, as always, a demand and a supply curve.
00:13
And if we imagine that this is for the states, if there would be no trade, right, we would get a certain equilibrium and a certain price, right? so black is the no trade equilibrium.
00:28
Equilibrium, pretty standard.
00:35
But now we're told that the us price for bicycles, right, this would be the us price, the no trade price, is higher than the world price.
00:46
So the world price is lower, right? there is some foreign price of bicycles that is lower than the us price, right? the us price is higher.
00:57
So in the with international trade, at the world price, the course, the quantity demanded of bicycles would be quite a lot because the people can buy them for cheap.
01:09
And the quantity supplied of domestic bicycles would be low because at the world price, american producers can't compete.
01:17
So this gap here would be our imports gap, right? the u .s.
01:23
Is going to import because you import things that are cheap, right? you export things that you're good at and which are cheap to others...